Anthony Holmes

 

Crisis management is a term popularised by Robert MacNamara when he was US Secretary of Defense during the Cuban missile crisis in 1962 but the process it describes can be identified throughout recorded history.

 

In fact some historians have suggested that the unfolding of history is the record of how society has managed its crises.

 

Given mankind's long experience of crises we might be forgiven for believing that we have developed some tried and tested procedures for resolving them. Certainly interstate diplomacy trades on this belief but there are still irreconcilable positions and wars. Management colleges give courses on risk assessment and controlling turbulent situations but companies still collapse into bankruptcy.

 

An important factor is the mental orientation of those directly involved. Remember that in a crisis the focus is the avoidance of consequences and, as such, strategic goals that may have driven actions in less turbulent times must be set aside.

 

The objective of crisis management is not to rescue the preceding strategy it is to stabilise the organisation, assess the damage and determine what action is feasible with the resources remaining.

 

In extremis it does not matter where the organisation emerges from the crisis or the course in which it is directed. What matters is that the organisation is viable and has sufficient resources to enable a new strategy to be formulated but only when the form in which it will emerge is clear.

 

While there is no totally reliable road map describing the path from problem through crisis to resolution there are some guidlines which are set out below and that have served me well. The key is the quality of the content that fills each of the 7 principles.

 

 

I deal below with each principle in more detail.

Avoid the bias and myopia likely when input is limited to a few. Obtain opinions and ideas from a wide spectrum of people ideally offering opposing points of view.

In this wide spectrum include external people who are experienced in crisis management and who can have no emotional objection to resolving the problem in a way that damages either their projects, power base or reputation.

2. Retain close control over the implementation of policy

A survival threatening event is of the highest priority and this must be emphasised by the activity related to it being championed and closely controlled by the most senior executive. All other programmes and initiatives must be subordinated for the duration.

3. Limit objectives

Objectives must be limited and ordered. Not over generalised or over simplified.

The organisation must focus its resources on overcoming the threatening issue and the first objective is to create stability to ensure that the pace of decline doesn’t accelerate out of control

           a. Stability provides time and ensures that there is a consistent shape to the problem you are confronting.

           b. Creation of stability will not resolve the problem but facilitates the rational formulation of clear programmes to resolve of the underlying issues.

           c. Once stability has been achieved set limited objectives for the next phase (6 to 12 months). In formulating these objectives remember that your horizon of expectation is near which means stability is fragile and collapses if no progress is made during the short term.

           d. Remember also that not all problems can be resolved in a manner that preserves the independence or shape of the subject entity. Wars are lost, patients die, companies file for bankruptcy.

4. Maintain flexible options

Unshakeable commitment to a single course of action may demonstrate conviction but can be fatal.

Do not pursue policies that close off access to all other options. Maintain the flexibility to abandon a preferred, but failing option and move to a credible alternative. Plan B should be fully developed and plan C should be understood in outline.

5. Reduce time pressure

Decisions taken under time pressure are often ill-considered and usually incorrect. It doesn’t necessarily follow that good decisions result from more time being available as this time may be squandered by management hoping that their original strategy will ‘come good’.

This is why changing the CEO of a company in crisis at an early stage is advisable. Change is necessary but takes time and those newly in charge are usually given a period of time that is not available to their predecessor.

6. Understand the nature and potential behaviour of the adversary

Make no mistake in every crisis there is an adversary, a party that is pursuing their own interest and will do so at the expense of yours. In the corporate arena this is often a lender represented by a bank or bond holder who has rights that may be enforced in a default situation.

A crisis is unmanageable when your adversary sees no advantage in working with you to find a mutually acceptable outcome.

It crucial to manage this relationship but too simplistic to believe that the adversary’s potential loss will discourage them from exercising their rights. Your first loss is your smallest is an important banking maxim which means if the lender has no confidence that your plan will give them more than they believe they currently have they will withdraw support.

The key is to know what they believe they currently have. If you ask they won’t tell. To do so may weaken their negotiating leverage that is born of your ignorance and fear that you may not satisfy them. You must take steps to work this out for yourself.

7. Maintain communication.

There are 3 audiences;

              a) Stakeholders…lenders, bondholders, shareholders
              b) Supplies and customers
              c) Staff

Each audience requires a nuanced version of the same message.

Remember, the void of silence is always filled by speculation. You have no control of speculation and you need to manage what your audience’s opinion.

                                                         ooOOoo

Most crises mature gradually but at an accelerating rate. By the time they migrate from a problem to a crisis in which a wider collection of parties must recognise their exposure they move up a gear, turbulence leads to instability and panic and collapse becomes a significant risk.

There is an unfortunate tendency that, at an early stage, crisis management becomes a series of isolated insights floating on an ocean of generalisations. This is the consequence of inexperienced people with little direct expertise in crisis management attempting to create the impression that everything is under control. Manufacturing this illusion by attempting misdirection, while understandable, does nothing to address the underlying issues, allows the position to deteriorate and destroys credibility. No one is fooled that, however elaborate the illusion, the magician can really make the elephant dematerialise.